According to the CS Treasury, Henry Rotich, Kenya is expected to finalise the deal on getting a new standby credit facility with the International Monetary Fund within two months time. The CS also stated that the draft of the new IMF agreement no longer made abolishing the interest rate cap a precondition and would focus on financial sector reforms instead.

The previous USD 1.5 Billion credit facility expired last year when the government failed to meet the Fund’s conditions for an extension, including the repeal of a cap on how much interest commercial lenders can charge.

Lack of the credit facility was expected to make the interest rates on the latest Eurobond expensive due to the fact that we lacked precautionary measures to guard against exogenous shocks to our balance of payments. However, we got favorable rates that is 7% for the  USD 900 Million seven-year bonds  and 8% for the 12-year paper for USD 1.2 billion.

According to analysts, we got a favorable rate given that we hadn’t finalized an agreement with IMF. This was explained as being due to the fact that investors were confident of the debt issues out of Kenya as such we were deemed low risk.

However, the pricing and shorter maturity of the Eurobonds than originally planned is an indication of a decreased appetite for Kenyan debt among investors. This is a result of the concern due to the high debt build up and cost-efficiency of flagship projects such as the standard-gauge railway.